The API route makes crunching your exchange transaction data relatively smooth, but isn’t an option for wallets, and because cryptocurrencies work in different ways, there is no way to simply absorb all wallet transactions in one go.
You’ll need to approach wallets on a case by case basis and the options may vary depending on the crypto tax service you choose, but will likely fall into one of this categories:
- HD Wallets & xpub addresses
- Importing public addresses
- Exporting/Importing/Generating CSVs
- Manually Inputting transactions
HD Wallets & xpub Addresses
For HD wallets, and coins that follow Bitcoin’s UTXO approach to transactions, the process is fairly simple because they are designed to nest all addresses you’ve ever used within something called your xpub address. This will generally include Bitcoin, Bitcoin Cash, Dash, Dogecoin, Litecoin, Zcash.
An xpub address is an extended public address from which all child addresses can be derived. By sharing this one address with the crypto tax service they can see all the associated addresses and transactions, so this isn’t information you would regularly hand over for privacy reasons.
If you’ve held Bitcoin since pre-Segwit days you’ll need to import the Legacy xpub otherwise all transactions prior to that change will be missing.
Importing Public Addresses
Though Bitcoin is the dominant crypto, there are far more transactions happening on other blockchains for which you’ll need to share your public address.
For Ethereum based wallets like Meta Mask it is as simple as providing your Ethereum address and the software does the rest for all supported ERC20 tokens.
In fact for most wallets you can simply add the address for each applicable coin and the software will process it. One important tip is to use a good naming convention. The number of imported wallets can quickly get to double figures, and without a clear name it will be impossible to figure out what they are.
The same is true for the main Ethereum based DEFI services like Compound or Uniswap; you provide your Ethereum address and the software can do the rest, but given the explosion in DEFI, NFTs, CEFI and beyond there is a good chance that a service you’ve used simply isn’t supported, which means your going to have to get your hands dirty.
Importing CSVs & manual transaction entry
So far the news about crypto tax services is all very positive. They can do a lot of the heavy lifting for you which will be a huge relief, but they cannot do all of it. There is no way to put a figure on it, but a sensible estimate would be that crypto tax services can process 70% of the average crypto users’ transactions automatically, leaving 30% as a grey area.
Where you use a service that isn’t just sending/receiving, but providing some value added, providing public addresses won’t work. The product may allow you to download transactions as a CSV and import them into the software, which is fine so long as the formatting matches that used by the selected crypto tax service.
Where it doesn’t, you are going to have to get your hands dirty and try and amend the data to be presented in the required format. This can be hugely frustrating and time-consuming as anyone who has tried manipulating complex date/time formats will tell you.
Some wallet or DEFI services won’t even offer downloadable transactions so you may have to use block explorer services to produce a JSON output, which you then convert to CSV, and apply the correct format.
Where none of the above work, your only remaining option is to manually enter the transactions, which is not only tedious but requires that you fully understand the difference between a trade, transfer, send and receive transaction and any appropriate tags.
Getting that wrong can make a big difference to the final analysis so make full use of any guides, knowledge base materials or community forums. Don’t expect to get responsive customer support. The 2021 bull run and increasing vigilance of tax authorities mean that all the popular providers are swamped.
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